Land Rover Defender Blog

4 Things To Know About Business Auto Loans

Fun Rover

Fun Rover

April 15, 2021


Popular Articles

8 Almost Useless Land Rover Mods

11th June 2014

Updated: What Makes a Defender Iconic?

29th November 2011


Typically, running a business can be a challenging undertaking for most entrepreneurs. It requires a lot of resources, including essential equipment and commercial real estate to ensure it operates as smoothly as possible. On the other hand, for most businesses and organizations, vehicles are another essential part of their operations as they’re used for the delivery of products to customers, on-site marketing, and to provide means of transportation from one location to another.

However, not all business owners have the capital to purchase vehicles with cash. This lack of funds may hamper the company’s ability to run a successful business. Fortunately, purchasing vehicles like Land Rover/Range Rover doesn’t have to be a problem once you obtain a business auto loan.

So, if you're planning to take out a business auto loan to acquire vehicles for your operations, here’s what you need to know about them.

What Is A Business Auto Loan?

Also known as commercial auto loans, a business auto loan refers to a kind of financing that is used to acquire and purchase vehicles for business use. It allows business owners to acquire the amount needed to buy a vehicle. Whether it’s intended for delivery purposes, transportation for employees, or sales and marketing efforts, any business can take out this type of loan to obtain funding for purchases of Land Rover/Range Rover vehicles. In most cases, having a Land Rover as a company car comes with plenty of benefits, making them suitable for commercial uses.

Moreover, applying for a business auto loan from a reputable lender can be beneficial for businesses and corporations since they don’t need to pay hundreds to thousands of dollars out of their pockets and bank accounts. Instead, they can take advantage of flexible monthly payments while being able to use the vehicles for the business. Lastly, the whole process works just like a personal auto loan but it’s more tailored to businesses.

What You Should Know About Business Auto Loans

Now that you know what business auto financing is, it’s time to learn how it works to determine whether it’s a good option for your business. The following are the things you should know about business auto loans:

1. Applying For A Loan Requires Documentation

Although the requirements for business auto loans differ from one lender to another, the applicants are still expected to comply with the common application requirements. This means that certain personal and business documents should be presented before you can push through with your business auto loan application. These pieces of documentation may include business licenses, Articles of Incorporation to prove business ownership, the Employer Identification Number (EIN), and many more.

Moreover, you’re also required to provide copies of your tax returns, bank statements, and cash flow statements to prove your ability to make monthly repayments. Lastly, it’s also important to note that both personal and business credit histories may also be considered during the loan process.

2. Your Credit History Matters

Typically, lenders provide the best commercial auto loan rates for borrowers with great credit histories and a proven track record of good business cash flow. In other words, if you have an excellent credit rating and history, you may get the lowest interest rate which is under 3%.
On average, borrowers with great credit scores can receive a rate of 3% to $4% or more over a five-year repayment term. However, if you have a poor credit score, some lenders may still allow you to apply for such a loan but the interest rate can go as high as more or less 18%.

3. A Business Auto Loan May Require A Personal Guarantee

For most business auto loan offers, business owners with at least a 20% stake in the company should sign a personal guarantee before becoming eligible for the said loan. This means that they become personally liable for the loan in the event the business defaults on the payments. However, this situation may only apply to applicants with poor credit scores.

On the other hand, businesses with high credit scores may apply for a commercial auto loan without signing a personal guarantee. But this scenario may vary from one lender to another, Therefore, do some research first before choosing the lender to deal with and buying a car under your business name.

4. The Effects Of Defaulted Loan Repayments Vary

Generally, if your business auto loan doesn’t have a personal guarantee and your company failed to make loan repayments, your lender has the authority to repossess the vehicles purchased. However, in this situation, your credit history may not be affected.

On the other hand, if your company provided a personal guarantee and it defaulted on the payments, your lender may report the debt to the designated consumer credit reporting agencies, which may significantly affect your personal credit report and scores.

The Bottom Line

While a commercial auto loan may help you grow your company, it’s still important to understand the requirements, the processes, and how it may impact your business and personal life in case of defaulted payments.
Therefore, if you want to know whether a business auto loan is the right type of financing to purchase vehicles like the Range Rover, keep the information mentioned above in mind and you will be guided accordingly.

Leave a Reply

About Us

FunRover is a place for Land Rover enthusiasts to gather as a community and discuss the best 4x4 vehicles ever produced. We're building a library of high quality resources & articles to help owners along in their Land Rover ownership.

Get in Touch

Want to get in touch?